Belarus economy appears to unravel in wake of terror attack, crackdown

A week after a powerful bomb killed 13 people in a Minsk subway station, and President Alexander Lukashenko warned of stiff punishment for anyone who spreads "panic," Belarus's state-guided economy appears to be unraveling. Now, worried Belarussians are emptying shop shelves of durable goods and line up outside banks in hopes of converting their rubles into dollars or euros.

Experts say the economic crisis was on its way even before last week's deadly terror blast rocked Mr. Lukashenko's 17-year-old regime and rattled the population, mainly due to deteriorating relations with the Kremlin, Belarus's traditional sponsor.

Promises of financial aid from the European Union disappeared after Lukashenko launched a brutal – ongoing – crackdown against the independent media and his political opposition over allegations that he rigged the December polls in which he was re-elected to a fourth term with an improbable 80 percent of the votes.

But it was probably the remarkable speech delivered on TV by Lukashenko last week that sent Belarussians into the streets to unload their rubles in favor of foreign currencies and dry goods. Lukashenko announced that the terrorist attack had been "solved" by the KGB security service, and several suspects arrested. Then he warned of sweeping new measures against his beleaguered opposition, and special penalties for anyone spreading rumors about the bomb blast or panic over a possible currency devaluation.

"After the terrorist act and Lukashenko's reaction, we see huge lines forming at banks and people grabbing everything durable from market shelves, especially sugar, vegetable oil, and electronic appliances," says Yaroslav Romanchuk, an economist and former opposition presidential candidate.

"This emergency was coming for a long time, because Belarussian authorities cannot manage the exploding current account deficit, the energy crisis and the steady weakening of the ruble," as a result of the end to Russian subsidies, he says. "They need to come up with a program of reforms, but they seem incapable of doing so."

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Reminiscent of Soviet times

Khalip Lyutsina, a Minsk pensioner, says she has seen long lines forming outside banks and currency exchange offices all over the city. "But it seems like there is no foreign currency to buy," she says. "Everybody is scared and depressed, especially after that explosion in the metro last week. We have never seen anything like that here, and it's the main thing people talk about."

Some say it reminds them of Soviet times, when possession of just about any hard commodity was preferable to the dubious banknotes issued by the regime. "The best thing to get your hands on, if you possibly can, is a used car," says Mr. Romanchuk. "That's something valuable that can be taken to Russia and sold for real money."

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